Chinese smartphones enjoy huge patronage, earn little profits

Domestic mobile phone brands are shipped abroad in large quantities, but with small profits to show.

The shipment of Chinese mobile phone brands reached 216 million in the first two quarters of 2017, said China's Mobile Phone Domestic Market Operation Analysis Report in June 2017. The report was recently released by the China Academy of Information and Communications Technology (CAICT).

On the contrary, the profit margins of Chinese brands in the first quarter are less than 5 per cent, according to data from Strategy Analytics.

Chinese brands will continue to suffer supply chain problems as a result of weaknesses in independently developing key mobile phone components, an expert said.

For a long time now, key smartphone components, including clip, screen, internal storage, flash memory and camera clip, have been monopolized by some international brands. China still lacks domestic suppliers of key components like Sonny and Samsung, a telecoms expert, Bo Song, said.

The cost of key components accounts for 60 percent to 70per cent of the total cost of a smartphone. If there is shortage of components or hike in prices, profit margins of mid-low end phones are further shrunken, said an insider. A supply chain dealer estimates that 15 percent net profits for the mobile phone industry in China are hard to achieve.

The development of domestic brands is still limited by supply gap, though the local smartphone industry is striving for self reliance, chinanews.com reported.

Bo suggested that upgrading supply chain also plays a role in improving industrial chain. China should urgently improve its supply chain instead of struggling to cope with supply shortage, he added.